It came out of the business bank account, so it must be tax deductible.
Right?
Not necessarily.
This is one of the most common misunderstandings we see with business expenses.
Paying for something with your business card does not automatically make it a business expense.
The important question is not how you paid for it.
It is what you paid for and why.
What Makes an Expense Tax Deductible?
Generally, an expense must relate to earning your business income to be deductible.
In simple terms:
• If it is completely business related, it may be deductible.
• If it is a personal expense, it generally is not.
• If it is partly business and partly personal, you may only be able to claim the business portion.
Of course, different tax rules can apply depending on the type of expense.
What About Meals and Coffee?
Buying lunch while you are working does not automatically make it tax deductible.
You still need to eat whether you are working or not, so everyday meals are generally considered a personal expense.
There are situations where meals, travel or entertainment may be treated differently for tax purposes.
But simply paying with th